UPDATE 4-Southwest, WestJet to forge codeshare pact

(Adds closing share prices. In U.S. dollars unless noted.)

By Scott Haggett

CALGARY, Alberta, July 8 (Reuters) - Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) said on Tuesday it will start a codeshare partnership with Canada's WestJet Airlines Ltd (WJA.TO: Quote, Profile, Research, Stock Buzz), marking the No. 1 U.S. domestic carrier's first foray into the Canadian market and a key boost for WestJet's expansion plans and its stock.

Under the agreement, which will be put together by late next year for regulatory approval, the two airlines will sell seats on each other's flights, which means both get access to new customers with lower marketing costs.

WestJet shares rose C$1.41, or 11 percent, to C$14.10 on the Toronto Stock Exchange on Tuesday. The stock had dropped 19 percent in the 12 months before the agreement.

Southwest stock rose 80 cents, or 6 percent, to $13.95 on the New York Stock Exchange. Its shares have fallen 10 percent over the past year.

The move is Southwest's first international codesharing agreement though it had a domestic arrangement with ATA Airlines, which went out of business in April. It is the first such deal for WestJet, Canada's No. 2 airline.

The agreement is seen giving WestJet additional heft in the crucial transborder market that's dominated by larger rival Air Canada (ACb.TO: Quote, Profile, Research, Stock Buzz) and will add new routes to major U.S. centers.

"It's very positive for WestJet, no question about it," said Cameron Doerksen, an analyst at Versant Partners. "WestJet's transborder routes are limited to sun and leisure destinations. But when you include Southwest's network, WestJet travelers will get access to almost all major cities in the U.S. It puts them on an equal footing with Air Canada."